Littlefield v. Perry, 88 U.S. 205 (1874)
U.S. Supreme CourtLittlefield v. Perry, 88 U.S. 21 Wall. 205 205 (1874)
Littlefield v. Perry
88 U.S. (21 Wall.) 205
1. Where one instrument, duly recorded in the Patent Office, contains in unmistakable language an absolute conveyance by a patentee of his patent and inventions described (in this case, applications of a principle of heating furnaces for houses, heating stoves, steam boilers &c.), and all improvements thereon within and throughout certain states and an agreement by the assignee to pay a royalty on all patented articles sold, with a clause of forfeiture in case of nonpayment or neglect, after due notice, to make and sell the patented articles to the extent of a reasonable demand therefor, the grantee will not, by an agreement supplementary to such assignment and of even date but not recorded, be reduced into a mere licensee as respects a right to sue in the federal courts for infringement within the assigned territory by the fact that in the supplementary agreement, the parties declare that nothing in the grant shall give the assignee the right to apply the principle of the invention to one special purpose (in this case to the heating of several rooms in a house by furnaces erected in the cellar), the same being intended to be reserved by the patentee. And this is so although the supplementary and unrecorded agreement be referred to in the recorded one. The reservation will be regarded as the grant back of a mere license from the assignee to the patentee.
2. Such grantee or one claiming under him may accordingly, as assignee, under the patent acts sue in the federal courts to prevent an infringement upon his right.
3. Even though this were not so and he not technically an assignee, such a grantee may, under the Patent Act, which provides
"That all actions, suits, controversies, and cases arising under any law of the United States granting or confirming to inventors the exclusive right to their inventions or discoveries shall be originally cognizable, as well in equity as at law, in the circuit courts &c.,"
maintain a suit in his own name in the federal court against the patentee alleged to infringe. He has the exclusive right to the use of the patent for certain purposes within a defined territory, and so holds the right under the patent. alleging infringement, a construction of the patent is involved; this raises a question "under" the "law." That such a suit may involve the construction of a contract as well as of the patent will not oust the court of its jurisdiction. If the patent is involved, it carries with it the whole case.
4. Semble. Where the patentee himself is infringing the rights of his own licensee, and the licensee (not being able to sue the patentee in the usual way in which a licensee sues the infringer -- i.e., in the patentee's name)
is remediless so far as the federal courts are concerned unless he can sue in his own name -- he may so sue in equity, which regards substance and not form. The cases of strangers and the patentee himself distinguished in the category of infringement.
5. Where assignees of a patent grant to A, and afterwards, not regarding that grant, grant, though without warranty, to B., if A. reconvey to them, B. has the right by estoppel against his grantors.
6. Where a person had a patent for "a coal burner so constructed as to produce combustion of the inflammable gases of anthracite coals," and had also a pending application for another improvement in stoves, devised "for the purpose of economizing and burning the gases generated by the combustion of anthracite coals," and afterwards executed a grant which (after reciting that he held a patent "for a coal burner so constructed as to produce combustion of the inflammable gases of anthracite coals," and that he had "made application for letters patent securing to him a certain improvement in the invention so as aforesaid patented to him"), then proceeded to assign all the right, title, and interest which he then had or might thereafter have "in or to the aforesaid inventions, improvement, and patent or the patent or patents that may be granted for said inventions or any improvement therein," he will not be allowed -- on his before-mentioned "application's" being rejected and on his getting subsequently to the date of the grant and of the rejection, a patent for an improvement in stoves so devised as
"to burn the gaseous and more inflammable elements of the coal in contact with its more refractory portions, and thus secure a more complete combustion of them both,"
which his grantee asserts to be for the same thing essentially as was the rejected application, and so to have passed under the grant -- to deny that the application was for an "improvement" on the first patent. He is estopped by his grant describing it as an improvement on the first patent to do so. Accordingly, if the second patent be, in view of the court, for essentially the same thing as was the rejected
application, it passes under the assignment as an "improvement" on the first patent.
7. Where a patentee is himself the infringer of rights under the patent which he has assigned, equity looks upon him as a trustee faithless to his trust -- the violator of rights which he was bound to protect. It will accordingly charge him for all profits improperly made, as well for profits on original patents, the subject of original bill, as for profits made on reissues obtained pendente lite and the subject of a supplemental bill.
8. Where the suit is for infringing patents for certain improvement in coal stoves -- coal stoves generally and various improvements on them being long known -- and the decretal order directs an account of all the profits which the defendants have received from the manufacture, use, or sale "of stoves &c. embracing the improvements described in and covered by the said letters patent and the reissues thereof, or any of them," the order is too broad. The true rule is stated in Mowry v. Whitney, 14 Wall. 620, where it was held that the question to be determined in such a case is "What advantage did the defendant derive from using the complainant's invention over what he had in using other processes then open to the public and adequate to enable him to obtain an equally beneficial result?", and that the fruits of that advantage are his profits, and to be accounted for.
9. As a general thing, interest on profits is not allowable. Profits actually realized are usually the measure of unliquidated damages. Circumstances, however, justify the addition of interest.
On the 5th of April, 1853, Dennis Littlefield, of New York, being at the time the patentee under a patent issued April 15, 1851, for "a coal burner so constructed as to produce combustion of the inflammable gases of anthracite coals" and having then on file in the Patent Office an application, dated December 30, 1852, for a patent securing to him a stove arranged and operating "for the purpose of economizing and burning the gases generated during the combustion of anthracite and other coals" -- and the applicant stating that it was his purpose to apply it
"to furnaces for heating buildings, to cooking stoves or ranges, to the furnaces of locomotives, or in any other situation where it is an object to economize waste gases or to consume smoke"
-- entered, as a party of the first part, into an agreement -- evidenced by two separate documents, the first styled in some
of the pleadings in the case, "a grant," and the second "a supplementary agreement" -- with the firm of Treadwell & Perry (to whom he then owed the sum of $1,500) as a party of the second part, concerning the subjects &c., embraced in the patent. The "grant" was thus:
"Whereas letters patent have been granted to and are now held by the said party of the first part for a coal burner so constructed as to produce combustion of the inflammable gases of anthracite coal, which letters bear date the 15th of April, 1851. And whereas the said party of the first part has made application to the Patent Office for letters patent securing to him a certain improvement in the invention so as aforesaid patented by him, and said application is now pending, therefore the said party of the first part, in consideration of one dollar to him in hand paid by said parties of the second part and of the agreements herein contained on the part of said parties of the second part and of the agreements contained in a certain agreement this day executed between the parties hereto and bearing even date herewith, hath and by these presents doth assign and transfer, to the said parties of the second part, their executors, administrators, and assigns, all the right, title, and interest which the said party of the first part now has, or can or may hereafter have in or to the aforesaid inventions, improvement, and patent, or the patent or patents that may be granted for said inventions, or any improvements therein, and on any extension or extensions thereof within and throughout the territory embraced within the states of New York and Connecticut, for and during the term for which the aforesaid letters patent were granted, and the terms for which any patent for the aforesaid improvement, and any other improvement or improvements thereof, or extensions for or of either thereof, may be granted. And the said party of the first part doth hereby, for himself, his heirs, executors, and administrators, guaranty to the said parties of the second part the full and uninterrupted enjoyment of the use and right to use, to make, construct, and to vend to others to use, the inventions, improvements, and patents aforesaid, during the terms aforesaid, as against all other persons whomsoever within the territory aforesaid."
"And the said parties of the second part hereby agree to pay unto the said party of the first part, for the right and interest
hereby assigned and conveyed, provided, and as long as said party of the first part shall well and faithfully keep and perform all the agreements herein, and in the aforesaid agreement this day executed, between the parties hereto, the sum of fifty cents on each and every stove or coal burner embracing said inventions and improvements hereby assigned, which shall be sold by said parties of the second part, after they shall have sold fifteen hundred of said stoves or coal burners, such payments to be made at the times and in the manner particularly specified in the aforesaid agreement this day executed between the parties hereto."
"It is expressly understood and agreed between the said parties that in case said party of the first part shall well and faithfully keep and perform all the agreements herein and in the aforesaid agreement, bearing even date herewith, contained, on his part, and the said parties of the second part, their executors, administrators, and assigns, shall without just cause refuse, or shall neglect to make and sell said coal burners to such extent as the demand therefor shall reasonably warrant and require, after reasonable notice shall be given to them by said party of the first part, requiring them so to make and sell the same, that this assignment and transfer shall thereafter be void and of no effect, and all the rights and interests herein and hereby conveyed shall thereupon revert to the said party of the first part, his executors, administrators, and assigns."
The "supplementary agreement," dated like the other on the 5th of April, 1853, and like the other, with Littlefield, the patentee, for a party of the first part, and Treadwell & Perry, the assignees, party of the second part, was thus:
"Whereas, the said party of the first part hath agreed to sell, assign and transfer unto said parties of the second part all the right, title, and interest which said party of the first part now has or can or may hereafter have in or to certain letters patent of the United States granted to him on the 15th of April, 1851, and the invention thereby patented and to a certain improvement thereon, an application for a patent for which is now pending, and to any and all extensions thereof, within the States of New York and Connecticut upon certain conditions and stipulations.
And whereas said party of the first part is now indebted to the said parties of the second part in about the sum of $1,500, and it is understood and agreed between the parties hereto that the premium of fifty cents upon each stove embracing said invention and improvements of said party of the first part which shall be sold by said parties of the second part shall be retained by them until they have sold fifteen hundred of said stoves and applied upon the aforesaid indebtedness of said party of the first part to them. Now, in consideration of the premises, the said parties to this agreement hereby mutually agree to and with each other as follows, to-wit:"
"The said party of the first part hereby agrees:"
"1. That in case any suit or proceeding shall be commenced against the said parties of the second part, or any persons holding under them, affecting the validity of said letters patent, or either of them, or for violating any previous patent by the use and enjoyment of the rights, interests, and privileges conveyed to said parties of the second part, by an assignment this day made to them by said party of the first part, or any alleged infringement of any other patent, he will . . . assume and conduct at his own cost the defense against all such suits and proceedings and keep and save entirely harmless and indemnified the said parties of the second part, their executors, administrators, and assigns, of and from all damages, costs, and expenses on account of the same; and further that he will, whenever required by said parties of the second part or their assigns, sue any and all persons who shall infringe or violate, within the States of New York or Connecticut the said patent, or any patent or patents which may hereafter be obtained in respect to the subject matter thereof or of either of the same in his own name or otherwise, but at his own cost or charge, and shall conduct the same for the use and benefit of said parties of the second part, their executors, administrators, and assigns; and he further agrees that in case the said letters patent already granted, or any patents which may hereafter be obtained by him as aforesaid for the subject matter thereof shall be adjudged invalid, so as to deprive the said parties of the second part of the use and enjoyment of the rights and interests conveyed by the aforesaid assignment, that the agreements therein and herein contained on the part of said parties of the second part shall thereupon
become void and of no further effect as against them or their assigns."
"2. That he will furnish to the said parties of the second part, before the first day of August next, at the cost price thereof, at the furnace of said parties of the second part, undressed cast iron patterns for four several sizes of the coal burner, patented in and by the aforesaid letters patent and embracing all the improvements therein for which letters patent shall then have been secured suitable to mould and cast from, and that he also will furnish at the place and price aforesaid, within a reasonable time after letters patent have been secured by him therefor, undressed cast iron patterns of the several sizes of all improvements upon said coal burners which shall be made or invented by him."
"3. That he will pay the balance of the said indebtedness to said parties of the second part, over and above the said sum of $750, in monthly installments, from this date, of not less than $100."
"The said parties of the second part hereby agree:"
"1. That so long as the said party of the first part shall well and faithfully keep and perform all the agreements herein, and in said assignment bearing even date herewith, contained on his part, the premium of fifty cents upon each stove or coal burner embracing the aforesaid inventions and improvements, which shall be sold by them, shall be retained and applied by them toward the payment of the said indebtedness of said party of the first part to them, to the extent and amount of $750, and that after such amount shall have been thus paid they will pay to said party of the first part, his executors, administrators, or assigns, the premium or sum of fifty cents on each and every of said stoves or coal burners which shall thereafter be sold by them; that they will keep a true account of all sales of said stoves or burners, which shall be open to the examination of the said party of the first part, and that a settlement of and for the premiums on said sales shall be made by them with said party of the first part, on the first day of April in each and every year hereafter."
"2. That they will also pay, in the manner and at the times aforesaid, the sum or premium of fifty cents upon every stove or burner, furnace, range, oven, or heater, of whatever kind or
description that they may originate or construct upon the principle of the coal burner, so patented as aforesaid by said party of the first part after patterns of their own design or contrivance, it being, however, hereby expressly understood and agreed by said parties of the second part, that nothing herein or in said assignment contained shall give to them the right to use or apply the principle of said coal burner to furnaces that are used or erected in the cellars or basements of houses for the purpose of heating several rooms or larger part of a dwelling house, the same being intended to be reserved by said party of the first part."
"3. That they will, in case the said party of the first part shall well and truly keep and perform all the agreements on his part herein and in said assignment contained, manufacture and use all reasonable efforts to sell so many of said stoves or burners as the demand therefor will reasonably warrant and require; and that in case they or their assigns shall, without just cause, refuse, or after reasonable notice from said party of the first part, shall neglect to manufacture or sell said stoves or burners to such extent as aforesaid, then that the aforesaid assignment shall become inoperative and void, and this agreement shall cease and be of no further effect. But in that event, it is expressly understood and agreed that in case the said indebtedness of said party of the first part shall not then have been fully paid or satisfied to said parties of the second part, the same shall thereupon be at once due and payable, and that the payment thereof may be required by them from said party of the first part; provided however that such refusal or neglect shall occur for the reason that said stoves or burners cannot be sold by said parties of the second part on account of some practical defect in the principle thereof."
The first of these two agreements, the grant, was duly recorded in the Patent Office, April 11, 1853. The second, or supplementary agreement, was never recorded.
The application of Littlefield, dated December 30, 1852, for an improvement in his first invention, and mentioned in the two documents, was rejected by the Patent Office, and on the 23d July, 1853, withdrawn by him.
On the same day that he thus withdrew it, he filed a second application, it being for "a new and useful improvement in stoves," so devised as
"to burn the gaseous or more inflammable
elements of the coal in contact with its more refractory portions, and thus secure a complete combustion of them both."
The specification of this application, like that of the application rejected and withdrawn, stated that the patentee did not purpose to limit it to stoves for heating purposes alone, but to employ it wherever it could be advantageously applied, particularly to house furnaces, cooking ranges, steamboat boilers, and stoves.
Upon this application, a patent was issued, January 20, 1854. On the 27th June, 1861, a patent for an improvement on this patent of 1854 was granted, and on the 9th November of the same year a reissue. Numerous other patents outstanding, and the subject of this controversy, were admitted to be reissues of this patent of 1854 or of patents for improvements upon it.
In this state of things, Treadwell & Perry, on the 25th of March, 1862, assigned all their interest to a certain George W. Sterling. He becoming dissatisfied with his purchase, the sale, by agreement, was cancelled, and he executed, June 2, 1862, a reassignment to Treadwell & Perry. Intermediately, however -- that is to say, on the 7th April, 1862, Treadwell & Perry had executed an assignment without any warranty of ownership to one Dickey. Both the reassignment from Sterling and the assignment to Dickey were left at the Patent Office for record on the 26th of June, 1862, and on the 2d July Dickey assigned all his interest to Mrs. Mary J. Perry, wife of John S. Perry, the Perry of the firm of Treadwell & Perry.
Littlefield having entered into partnership with one Jagger, and they two being engaged in making, within the States of New York and Connecticut, stoves under the patents of 15th April, 1851, 20th January, 1854, and June 27th, 1861, and under the patents for improvements on the inventions therein patented, and under the reissues of these several patents, Mrs. Perry, on the 27th of August, 1862 -- alleging that the invention secured by the patent of April
15, 1851, was regarded by Littlefield "only as a germ from which a more valuable construction was to arise," and that with a view of enhancing its value and utility, he had proceeded soon afterwards with various experiments for improving the inventions secured by that patent, and that the subsequent patents and reissues were but for improvements on the original one, which subsequent improvements, with the original one, had passed to Treadwell & Perry by the "grant" -- filed a bill in the court below against Littlefield & Jagger for injunction and account. Other improvements were patented and reissues made pending the suit. Mrs. Perry having died during the suit, her husband, who was trustee under her will, was substituted as complainant. All the parties -- complainant and defendants alike -- were citizens of the State of New York. A supplemental bill filed after the date of reissues claimed the profits under them.
The assignment above mentioned of April 7, 1862, to Dickey, was executed by Perry. Treadwell, in testimony, swore, more than once, that he assented to it.
For the benefit of the reader who may not recall the exact words of the Patent Acts and the exact construction given to them, it may be well here to state:
1st. That one of the Patent Acts enacts as follows: [Footnote 1]
"Every patent shall be assignable in law either as to the whole interest or any undivided part thereof by any instrument in writing, which assignment, and also every grant and conveyance of the exclusive right under any patent to make and use and to grant to others to make and use, the thing patented within and throughout any specified part or portion of the United States, shall be recorded in the Patent Office within three months from the execution thereof."
"All actions, suits, controversies, and cases arising under any law of the United States granting or confirming to inventors the exclusive right to their inventions or discoveries shall be
originally cognizable, as well in equity as at law, by the circuit courts of the United States or any district court having the powers and jurisdiction of a circuit court."
2d. That under the first of the above-cited sections, it has been judicially held [Footnote 2] that the patent is assignable only
(a) As to the whole interest, or an undivided part of such whole interest in every portion of the United States, OR
(b) As to an exclusive right within and throughout some specified part of the United States.
And that under the second of the above-cited sections, an assignee, either of the entire interest or of the exclusive right within a specified portion of the United States, may sue in his own name infringers in the federal courts.
And that it has been further decided [Footnote 3] that a mere licensee cannot so sue, and that whenever a contract is made in reference to patent rights, which is not provided for or regulated by the preceding or other statute of the United States, the parties, if a dispute arise, stand as regards their right to sue in the federal courts and otherwise upon the same ground as other litigants.
The defendant accordingly set up either in answer or argument various defenses -- as,
I. That the grant and the supplemental agreement were one agreement, the latter being referred to in and making part of the former. That in consequence of the limitation and reservation made in the supplemental agreement (supra, p. 88 U. S. 212), the right to use or apply the invention patented or applied for, given in the grant, was never given as to part of the invention, the part -- namely which applied
"to furnaces that are used or erected in the cellars or basements of houses for the purpose of heating several rooms or larger part of a dwelling house, the same, continued the supplementary agreement, being intended to be reserved."
the whole invention nor any undivided part of it being thus transferred, Treadwell & Perry were, under the above-quoted statute, which "renders the monopoly capable of subdivision in the category of its locality, but in no other way," [Footnote 4] not invested with such a title as under the acts of Congress would give them a right to sue in the federal courts; that the assignee must have the entire right within the territory specified; that they were mere licensees and unable under the Patent Acts to maintain a suit in their own name or to give another this right; that accordingly no jurisdiction under the statute existed in the circuit courts to hear the case, both complainant and defendants being citizens of the same state.
II. That the fact that the contract between the parties did not vest in Treadwell & Perry any exclusive right in, or legal title to, or equitable right to perfect a title to any patent or invention, nor confer any right beyond that of licensees appeared further under decisions of the federal courts for the following reasons:
Because it was stipulated that the patentee should sue all infringers "in his own name," or otherwise, showing the intent of the patentee to retain the control of the patents.
Because he reserved a premium or royalty on each stove to be manufactured by Treadwell & Perry.
Because Treadwell & Perry were required to account to him in a particular manner for all stoves made and sold by them.
Because there was a provision by which the contract might become "inoperative and void," and by which "all the rights and interests . . . conveyed" were to "revert" to the patentee, in the event that Treadwell & Perry neglected and refused to make and sell the stoves mentioned.
III. That the title was in Treadwell & Perry, inasmuch as Sterling, previously invested by them with a title, reassigned to them after they had assigned to Dickey, the argument here being that there was no actual warranty in the transfer
to Dickey and none to be implied; that the transfer was in fact but a quitclaim, and that it was settled law that
"If a possessor, without title, convey by quitclaim deed, and afterwards acquire good title, it does not inure to the benefit of the grantee. [Footnote 5]"
IV. That the inventions which Littlefield & Jagger were using were inventions under the patent of 1854, or reissues of it, or for improvements on inventions thus secured, and that the patent of 1854 was not for any "improvement" upon the invention of the patent of 1851 or on the invention described in the application of 1852 or improvement of it or reissues for either, the things alone transferred by the "grant."
[On this question of fact the defendants went into a great body of proof, exhibiting in court models of all the things at any time applied for, patented, or secured by reissues, with a great amount of parol evidence to show that the inventions which they were using were not "improvements" on anything which had passed by the grant or supplementary agreement of 1852, but were essentially different inventions.]
V. That no rights now existed in the complainant, inasmuch as Treadwell & Perry had forfeited whatever rights the grant gave them, by not making and selling stoves as they had stipulated by the agreement to do.
[On this point, some proofs were given, but it was not shown that Littlefield had given to them the notice required by the supplementary agreement, supra, p. 88 U. S. 212.]
VI. That the supplemental bill, claiming the profits under the last reissues, extinguished and cancelled all claims for infringement of the original and prior reissues, since suits pending for the infringement of an original patent fall with its surrender for a reissue, because the foundation upon which they rest no longer exists. [Footnote 6] And that this cannot be helped by a supplemental bill.
The court having heard the case, directed an account of
"all the profits, gains, and advantages which the said defendants, or either of them, have received, or which have arisen or accrued to them, or either of them, from the manufacture, use, or sale of stoves within the states of New York and Connecticut, embracing the improvements described in and covered by the said letters patent, and the reissues thereof, or any of them."
The master, stating an account on these principles, found due to the complainants as of December 6, 1869, the sum of $52,747, the defendant giving little assistance in enabling him to arrive at the truth of things; and the court, overruling numerous exceptions to the report, some of form and some to the principles on which the account was stated, and approving it, added interest to the date of final decree; entering then, March 19, 1872, a decree for $61,486.
From that decree, John S. Perry, who, by substitution in the course of the proceeding, had, as already said, become complainant as trustee and executor of his wife, Mary, the original complainant, appealed.